Mid-sized independent broker-dealer Newbridge Securities Corp. recently agreed to pay $850,000 to settle a class action suit that alleged price gouging by the firm over what it charged clients for postage and handling of their securities transactions.
The original complaint alleged that Newbridge failed to disclose to customers that the transactional 'handling fee' it charged them included a profit to the firm, that certain customers paid lower fees and that the fee was not based on the costs of handling a particular transaction, according to the complaint. The suit was filed in December 2012 in Circuit Court of Broward County, Fla., and two month later was moved to U.S. District Court for the Southern District of Florida.
The lead plaintiff in the suit was Newbridge client Richard Remington, who was later replaced by Ursula Finkel. Members of the class action included clients of Newbridge from June 2008 to January 2013, according to the settlement agreement, which was approved in December by federal judge James I. Cohn.
December was a
tough month for Newbridge.
The
Financial Industry Regulatory Authority Inc. fined the firm $138,000 for allegedly failing to buy and sell corporate bonds at a fair price for their customers. The firm allegedly failed to take into consideration relevant circumstances “including market conditions with respect to each bond at the time of the transaction, the expense involved and that the firm was entitled to a profit,” according to Newbridge's BrokerCheck profile. The firm did not admit or deny the allegations as part of the settlement.
Neither Newbridge chairman Lenny Sokolow nor chief executive Thomas Casolaro, returned calls seeking comment.
The firm lost $434,600 on $37.9 million in revenue in 2013, according to its most recent annual audited financial statement submitted to the Securities and Exchange Commission.
In May 2011, Finra CEO and chairman Richard Ketchum raised the issue of
postal price gouging by broker-dealers in a speech to industry executives.
Postage and handling fees charged by broker-dealers ranged at the time from $3 or $4 to as high as $75 per transaction, executives said. Some firms had been inflating postage and handling fees after the financial crisis as a way to boost profits.
The issue of postage and handling costs has been hanging over Newbridge for four years. In April 2011, the Connecticut Banking Commissioner fined Newbridge $10,000, alleging that the firm charged a “handling fee” that was unrelated to actual transactional costs and that the firm failed to tell customers the fee included a profit to Newbridge, according to BrokerCheck. Finra in January 2013 fined Newbridge $50,000 over the same issue.
